To homebuyers asking “Is now a good time to buy a home?,” the answer is a resounding yes, according to mortgage industry expert Dave Stevens.
Is now a good time to buy a home? Yes, it is. In fact, winter and spring 2023 will likely be the best window homebuyers will have for the next several years.
There are a lot of misleading headlines out there right now about interest rates, housing price drops and a potential crash of the housing market. But many of the people touting those frightening prospects aren’t economists, nor have they spent 30 years in the mortgage industry.
As someone who entered this field when interest rates were in the teens – and who weathered the 2008 crash and helped right the ship as the Federal Housing Commissioner under the Obama administration – I can tell you that many of the current narratives aren’t grounded in fact.
Here is what’s really going on in the housing market – and why now is the time to buy if you’re qualified.
The historically low interest rates seen in 2020 and 2021 were remarkable. Rates in the 2% range are almost unheard of for a mortgage. But the COVID-19 pandemic was a once-in-a-lifetime occurrence. It was inevitable that rates would increase again in time, which they have.
Of course, the contrast between a 2.5% rate and a 7% rate is stark. Some homebuyers may wonder whether they missed the boat or whether they should wait for rates to drop again.
Here’s my take on that. Rates aren’t going to go back down to the 2% and 3% range, so if you weren’t able to buy then, you have to take your lumps and move on. But 7% is actually a pretty good rate for a home. And if rates drop again, you can refinance your mortgage to take advantage of it. If they increase, however, you’ll be glad you locked in your loan at 7%.
Either way, the sooner you buy, the more time you have to build equity in the home. That’s significant because home equity is a cornerstone of wealth-building in the U.S.
Like interest rates, housing prices were unprecedented during the COVID-19 pandemic. They soared in many places across the country, leading some people to believe that prices would ultimately crash.
That’s unlikely, however. Price increases have slowed, but home values increase over time.
As you can see in this chart from the St. Louis Federal Reserve, home sale prices in the U.S. have consistently trended upward since the 1960s.
We aren’t going to see a massive drop in prices now, even as competition for homes has cooled slightly.
Rather than waiting for a price crash, take advantage of the fact that this is a buyer’s market and that sellers are more likely than they have been in years to negotiate on price and other concessions.
Millennials are the largest generation in the U.S., and they are entering their peak home-buying years. Meanwhile, the country faces a persistent housing shortage.
There are numerous reasons for the shortage, including a drop in new construction following the 2008 crash, inflation’s impact on construction materials and labor, and zoning and other regulations that have hindered affordable housing construction, according to Fannie Mae.
The industry is well aware of the problem, but it won’t be solved overnight. That means that as more homebuyers enter the market, competition for available properties will be fierce once again.
Related reading: Family Is the Key to Hispanic Homeownership Surge
Here’s my perspective for prospective homebuyers: If you’re ready to buy a house, trying to time the market or waiting for a crash is a losing game. I believe that this winter and spring present homebuyers with a unique window in which they may be able to negotiate with sellers and lock in a reasonable interest rate.
Once demand picks up again, sellers won’t feel the pressure to make concessions and we could see bidding wars flare as they did in the past few years. Buyers who take advantage of the current opportunities may secure a good interest rate while also building home equity.
The information in this article contains personal opinions and may not entirely represent those of Fairway Independent Mortgage Corporation NMLS#2289.
-----------------
Copyright©2022 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
Fairway is required to disclose the following license information. AZ License #BK-0904162; Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Financial Protection and Innovation under the California Financing Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License; Georgia Residential Mortgage Licensee #21158; For licensing information, go to www.nmlsconsumeraccess.org; MA Mortgage Broker and Lender License #MC2289; Licensed Nevada Mortgage Lender; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker-NYS Department of Financial Services; Rhode Island Licensed Broker & Lender; Fairway Independent Mortgage Corporation NMLS ID #2289 (www.nmlsconsumeraccess.org).